TMI Blog1992 (2) TMI 140X X X X Extracts X X X X X X X X Extracts X X X X ..... om receipts from an auditorium owned by the bank and let out on daily basis for meetings, marriages and other functions. It is an undisputed fact that the assessee after taking the permission of the general body as per resolution dt. 27th June, 1976 approached the Registrar of Co-operative Societies in Kerala for permission to construct an auditorium. Such permission was granted as per letter of the Registrar dt. 4th June, 1977. The construction was completed on 26th June, 1980. The auditorium consisted of not only a hall but also other facilities like furniture, kitchen, sound and lighting system and the like. The auditorium was equipped for use as convention centre, or a conference hall, or a kalyanamandapam. It may also be noted that as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that these hire charges would legitimately be assessable under the head "income from business" and allowed the interest payable on funds attributable to the construction of the auditorium including facilities albeit at a lower figure than that claimed by the assessee. 5. Before us, the learned Departmental Representative submitted that the income derived by the assessee in the nature of hire charges from the auditorium could only be taxed under the head "other sources" and that it followed that the interest claimed and allowed by the CIT(A) would not constitute an outgo under s. 57(iii) of the IT Act. He relied upon the Supreme Court decision in the case of Sultan Bros. P. Ltd. vs. CIT (1964) 51 ITR 353 (SC). The learned counsel for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from business". The Supreme Court also noted, that both the lessor and the lessee intended that the building and the furniture and fixtures were to be used for one purpose, namely, for the purpose of running a hotel altogether and not one separately from the other, the entire rent received had to be assessed under the head "other sources". 7. The Supreme Court, however, sounded a note of caution. It indicated that whether a particular letting is business or not has to be decided on the facts and circumstances of each case. Each case has to be looked at from a businessman's point of view to find out whether the letting activity constituted a business or the exploitation of his property by an owner. A thing is not by its very nature a comm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ump house and boilers. It employed large staff and provided services such as scavenging and lifts. The Supreme Court concluded that such services rendered by the assessee to its tenants were the result of activities carried on continuously in an organised manner with a set purpose, and with a view to earning profit and that such activity constituted business activity and the income arising therefrom was assessable under the head "income from business". The Court held that the facts and circumstances of each case would certainly have a bearing upon the final result. 11. It now becomes necessary to apply the principles laid down by the Supreme Court to the facts before us. We have already noted that the assessee not only constructed an aud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the income from the other being taxable, it would become essential that a proper allocation of expenses have to be made as between the two activities in a rational manner. We note that the income from banking is fully deductible under the provisions of s. 80P(2)(a)(i). We also note that the business income derived from hiring out the auditorium and facilities would constitute taxable income. The CIT(A) in accordance with the decision of the Gujarat High Court relied on by him found that the total investment on the auditorium and facilities amounted to Rs. 23.42 lakhs. He noted on an analysis of the balance sheet of the assessee that 80% of the liabilities exhibited in the balance sheet constituted borrowed funds on which average rate of i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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